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USDA to validate payment eligibility

Mar 26, 2009

In response to the discovery of nearly $50 million in payments to ineligible farmers, Agriculture Secretary Tom Vilsack announced that the U.S. Department of Agriculture (USDA) and Internal Revenue Service (IRS) have begun efforts to ensure that high-income individuals and entities who request USDA payments meet income limits set forth in the 2008 Farm Bill.

Said Vilsack: "One of the goals of this Administration is to make certain that USDA payments are not issued to individuals and entities that exceed income eligibility limits established by law. Once this verification system is fully operational, high-income individuals and entities will be identified by USDA before farm program payments are actually disbursed to them."

Said Treasury Secretary Tim Geithner: "This cooperation between the Treasury Department and USDA will implement reforms from the 2008 Farm Bill to ensure payments go only to those who need them and are supposed to receive them. The goal is to limit excessive payments while providing for fairness to family farmers."

Beginning with the 2009 crop year and for successive years, in order to be eligible for USDA payments all recipients will be required to sign a separate form which grants IRS the authority to provide income information to USDA for verification purposes.

Before IRS will provide the information for a particular producer, IRS form 8821, or a similar form, must be obtained from each producer authorizing the release of information. Failure to obtain such form will make the producer ineligible for program benefits.

A written release from each producer or payment recipient will be required for this process. The Farm Service Agency will not receive actual tax data for the producers. All disclosure and Privacy Act provisions will be adhered to by the Farm Service Agency.

In October 2008, the U.S. Government Accountability Office (GAO) released a report stating that because the USDA does not have the management controls - such as reviewing tax returns - it could not ensure that payments are made only to qualified individuals. The GAO report also found that of the 1.8 million individuals receiving farm payments over a three year period (2003 through 2006), more than 2,500 had an average adjusted gross income (AGI) that made them ineligible for farm payments. Because of the inability of USDA to verify income, more than $49 million was paid to ineligible individuals.

The 2008 Farm Bill mandates that recipients of many Farm Bill payments, including direct payments, are not eligible for these payments if their gross nonfarm income average for the previous three taxable years is greater than $500,000. Additionally, direct payments cannot be paid to participants whose average adjusted gross farm income for the three-year period exceeds $750,000. Participants are ineligible for conservation payments if their nonfarm average gross income for the three-year period exceeds $1 million, unless at least two-thirds of their total average adjusted gross income is derived from farming.